Key Highlights

● Second-quarter sales and revenues rose 24% to $20.5 billion.

● Operating margin was 20.9%, against 17.3% a year earlier.

● Reported backlog reached a record $72 billion, up 92%.

● Operating profit included $392 million of expected tariff recoveries.

Caterpillar (NYSE:CAT), a component of the Dow Jones Industrial Average, reported second-quarter 2026 sales and revenues of $20.5 billion, up 24 per cent from $16.6 billion a year earlier. Higher sales volume added $3.1 billion and better price realisation added $0.6 billion. Construction Industries sales rose 35 per cent to $8.3 billion, Power & Energy rose 17 per cent to $8.2 billion, Resource Industries rose 20 per cent to $4.6 billion, and Financial Products revenues rose by 7 per cent to $962 million. Diluted profit per share was $7.77 against $4.62 a year earlier, and adjusted profit per share was $8.17 against $4.72. For the first six months, sales and revenues were $38.0 billion against $30.8 billion.

Power generation and the data centre effect

The Power & Energy segment is where artificial intelligence infrastructure shows most clearly. Growth is attributed to reciprocating engines, turbines and related services linked to data centre demand. Caterpillar will restart a 10-megawatt gas engine platform, adding about 1.5 gigawatts of capacity with shipments from the fourth quarter, and has repurposed a 250,000-square-foot facility in Wamego, Kansas, where the PGM130 turbine is already shipping. A record backlog of $72 billion, 92 per cent higher than a year earlier, is cited, with about 59 per cent expected to ship within 12 months, while Caterpillar's own release states only that order rates were strong and backlog grew.

Margins, cash and capital returns

Profitability improved alongside volume. Operating profit was $4.3 billion, up 50 per cent, and operating margin was 20.9 per cent against 17.3 per cent; adjusted operating margin was 21.9 per cent against 17.6 per cent. Segment margins were 24.6 per cent in Power & Energy, 23.3 per cent in Construction Industries and 14.9 per cent in Resource Industries. Operating profit included $392 million of expected recoveries of tariffs paid under the International Emergency Economic Powers Act, which is separate from underlying trading.

Restructuring items excluded from adjusted results included $139 million for divesting certain non-US entities and $63 million of other costs. Operating cash flow for the quarter was $4.4 billion, and enterprise cash was $6.7 billion. Caterpillar repurchased $1.5 billion of shares and paid $0.7 billion of dividends in the quarter. For the half year, operating cash flow was $6.2 billion against $4.4 billion a year earlier, and share repurchases were $6.5 billion.

Outlook and what the release leaves out

On guidance, the press release attached to the filing contains no formal outlook. Management is reported to expect mid-to-high teens growth in 2026 sales and revenues, up from low double digits previously. The release gives no tariff cost figure. Credit quality in Financial Products was stable to better, with past dues at 1.31 per cent against 1.62 per cent a year earlier and an allowance for credit losses of $294 million, or 0.84 per cent of finance receivables.

Data Centre Dependence and Tariff Recoveries Test the Durability of the Cycle

Record backlog and a margin above 20 per cent point to a strong cycle, but concentration risk matters: much of the incremental demand in Power & Energy depends on data centre capital expenditure, which can change quickly. Construction and mining equipment demand, pricing discipline, input costs and the durability of tariff recoveries also matter. Caterpillar's stated risks include economic conditions, commodity prices and shortages, trade policy and new tariffs, currency swings, competition, dealer inventory decisions, interest rates, Cat Financial delinquencies, credit ratings and legal matters.